Taiwanese economy sidelined, absorbed

By Huang
Tien-lin 黃天麟

Last month, political commentator Wang Hsing-ching (王杏慶), writing under his pen name, Nan Fang Shuo (南方朔), published an article about how the restructuring of the “strategic economies” of the US and Europe is accelerating the marginalization of Taiwan. The main thrust of the article is that, faced with a rising China, Taiwan increasingly depends on making easy money from Beijing through the Economic Cooperation Framework Agreement (ECFA).

In contrast, South Korea is making money through hard work as it strives to develop its European and US markets. As a result, Wang said, Seoul is demanding recognition as one of the world’s most advanced societies and quickly elevating its position in the global manufacturing chain. The US and EU are establishing free-trade zones with South Korea, whereas Taiwan continues to rely entirely on the ECFA, which is leading to Taiwan’s exclusion from Europe and the US’ economic strategies.

Wang’s critique of the ECFA hits the nail on the head. I would also add that the ECFA is causing Taiwan to be rapidly peripheralized by China, as it becomes more integrated with the Chinese economy. Whereas marginalization is an external process of being excluded, peripheralization is an internal process of being absorbed into something else.

Peripheralization has reduced Taiwanese manufacturers’ will to upgrade. Taiwan faces a host of problems, such as high unemployment, low wages, a rapidly widening wealth gap, insufficient domestic investment and weak economic growth. These problems are the effects of not just government incompetence, but also the core-periphery effect produced by the ECFA, with China at the core. Furthermore, this effect is spreading, according to recent economic data.

Taiwan’s exports contracted again in September. Total exports were US$24.61 billion, which was 4.6 percent down from August, and only a 9.9 percent increase on the same period last year. Annual export growth has been less than 10 percent for two straight months. One may think this is a result of global factors, but South Korea’s exports for September grew 19.6 percent compared with the same period last year. And despite pressure from a strong yen, Japan’s exports still grew by 12.7 percent in the same period.

Taiwan’s export orders in September were even worse, totaling US$36.96 billion. Annual growth in export orders was 2.72 percent, the lowest level in 23 months. Calculated in New Taiwan dollars, it represents an annual drop of 3.92 percent.

Another aspect is that investment in China by Taiwanese in the first nine months of this year came to US$10.54 billion, which is 23.06 percent up from the same period last year. That follows last year’s surge of 102 percent, highlighting the ECFA’s effect, as investment money continues to bleed out of Taiwan. When Taiwan has no blood left to shed, its investment in China will start to fall, but only because by then it will signal that Taiwan’s economy has become enfeebled.

The result of this investment outflow is that workers in Taiwan are again having to take unpaid leave. Taiwan’s jobless rate for September remained at 4.28 percent, the highest among the four “Asian Tiger” economies.

Taiwan’s stock market is still the weakest in the Asia-Pacific. For this year up to Oct. 24, the stock markets in Indonesia and the Philippines rose. South Korea’s dropped by 7.44 percent and Japan’s by 13.43 percent, but in Taiwan it fell by 16.74 percent.